QUOTE AND NEWS
Benzinga  Apr 12  Comment 
Delta Air Lines, Inc. (NYSE: DAL) shares are trading higher by $1.40 at $46.69 in Wednesday's session. The catalyst for the rally is a Q1 EPS beat of $0.04 with just a slight miss for revenues. After a higher open, Delta's stock briefly...
Motley Fool  Apr 12  Comment 
Delta kicked off earnings season for the airline industry with a disappointing Q1 performance but a strong Q2 forecast.
MarketWatch  Apr 10  Comment 
Delta Air Lines Inc. struggled to recover on Sunday from strong storms last week that led to 3,700 canceled flights, endangering its reputation for reliability.
Motley Fool  Apr 9  Comment 
Interested in this industry-leading airline? The sky's the limit with how much you can learn, but here's a good place to start.
Benzinga  Apr 5  Comment 
On CNBC's Fast Money, Pete Najarian recommended a long position in Delta Air Lines, Inc. (NYSE: DAL). He thinks the stock is oversold on the capacity issues and he believes it could trade higher to $50. See Also: How Is Earnings Season Setting...
Flightglobal  Apr 5  Comment 
New York Kennedy to Los Angeles is a hotly-contested route between four big US operators: legacy carriers American Airlines and Delta Airlines and hybrids JetBlue and Virgin America. Here we look at how these carriers compete in this market in...
Benzinga  Apr 4  Comment 
Airline stocks were suffering another down day on Tuesday after Delta Air Lines, Inc. (NYSE: DAL) reported March traffic numbers and updated shareholders on second-quarter guidance. Update Gist Here are the highlights from Delta’s investor...
Yahoo  Apr 4  Comment 
Delta Air Lines Inc on Tuesday lowered its forecast for a closely watched revenue metric, citing slower-than-expected improvement in average fares for flights booked at the last minute. The No. 2 U.S. ...
newratings.com  Mar 29  Comment 
ATLANTA (dpa-AFX) - Delta Air Lines (DAL) announced Wednesday that it has reached an agreement with Korean Air to implement a joint venture arrangement that will grow trans-Pacific network and boost competition between the U.S. and Asia. The...




 

This article is about the airline. For other uses, see Delta (disambiguation).

Delta Air Lines (NYSE: DAL) is the 2nd largest passenger airline in the world by available seat miles. Extreme competition in the industry has limited Delta's ability to raise prices to their natural supply/demand and cost reflective levels. As a result, Delta was forced into bankruptcy in September of 2005.[1] During the following few years, Delta decreased its number of aircraft types in an effort to reduce maintenance costs. On October 2008, Delta and Northwest merged to form a new joint airline called "Delta," which is the largest airline in the world by both enterprise value and available seat miles.[2]

Company Overview

Delta Airlines currently has a fleet of nearly 600 owned and over 200 leased planes and an average age of around 15 years. Delta has the 2nd largest and 3rd oldest fleet in the American airline industry.[3][4] The airline operates on a hub-and-spoke system , centered at airports in Atlanta, Cincinnati, New York JFK, and Salt Lake City. Delta is attempting to offset weak U.S. consumer demand by expanding heavily in international flights.

Business Growth[5]

  • Revenue: Revenue grew from $28.06 in 2009 billion to $31.75 billion in 2010, which is a 13.15% growth.
  • Net Income: Net income grew from a $1.23 billion loss to $593 million in income, due to a recovery from the recession.

Business Segments[5]

Domestic (65% of Revenue): Delta had significant double digit growth in domestic revenue since 2008. This is due to increased cargo and baggage handling fees due to new policy implementation.

International (35% of Revenue): Delta increased its international revenue and has had double digit growth since 2008. This is mostly due to an increased focus in the international arena due to the lower demand and higher competition from discount airliners in the U.S.

Key Trends and Forces

Airline industries are more sensitive to the economy than other industries

Typically, airline companies and aircraft manufacturers are more prone to swings in revenue and equity market prices due to the release of economic indicators.[6] Consumers tend to reduce travel if personal economic conditions are suboptimal, forcing airlines to cut capacity and production. Indicators such as unemployment indices, personal income, and even home sales affect airline industries in exaggerated fashion.

Recessions result in weaker demand for air travel

DAL and other competitiors experience significantly weaker demand for air travel during recessions. For example, during the 2009 financial crisis, global demand began to slow during the December 2008 quarter and global economic conditions in 2009 substantially reduced U.S. airline industry revenues in 2009 compared to 2008. Demand for air travel could remain weak if an economic recovery is slow or even fall further if a recession returns, and overall demand could fall lower than we are able prudently to reduce capacity. Weakness in international economies is will have a significant negative impact on DAL's operations due to DAL's growth outside of the United States.

Oil prices significantly impact DAL's bottom line

Like other airlines, fuel costs are DAL's largest operating expense, accounting for a quarter of the company's total operating expenses. Uncertainty in oil prices, forces DAL to enter into hedging agreements for its fuel. However, this poses a risk if oil prices drop significantly from the hedged fuel price. As a result of volatile oil prices, DAL faces uncertainty in costs.

Increased Competition from Low-Cost Airlines Erodes Average Fare

Delta is facing increased competition with some of its flagship routes. For example,when Southwest entered the Minneapolis-St. Paul and Chicago Midway Airport hubs, the average ticket price in those areas plummeted. Before Southwest's entrance in the market, fares were between $270 and $436.50 one-way. When Southwest entered, both airlines charged between $48 and $102 for one-way, coach tickets.[7] (Read more on Delta's Competition and Market Share...)

Competition

While Delta has embarked on a shift towards increased international routings, domestic airliners remain the most significant competition. DAL competes with other legacy airlines, like Delta, as well as with newer discount airliners like Southwest. The company did not file for bankruptcy after the September 11, 2001 terrorist attacks and consequently did not restructure its business model to cut costs as did its legacy airline competitors. DAL's discount airline competitors have been able to keep costs low because of their emergence after airline deregulation.

AirTran Holdings (AAI): AirTran Holdings (Nasdaq:AAI) is one of America’s largest low-fare passenger airlines. The airline has managed to achieve low operating costs despite relying on a hub-and-spoke system, in which most of its flights originate and terminate at its hub in Atlanta, Georgia. Given AirTran's continued reliance on the hub and spoke system, airline management has cited other operational factors as cause for the airline having a cost structure that is among the lowest in the industry.[8]

American Airlines (AMR): AMR is the parent company of American Airlines, the second largest airline in the world based on available seat miles and revenue passenger miles On an average day, American Airlines flies approximately 3,400 flights between 250 countries. The company has been recording net losses for many years and has experiences very weak demand for air travel driven, particularly during significant economic downturns. [9]

United Continental Holdings (UAL) United Continental Holdings (UAL) is a holding company and its principals are United Airlines and Continental Airlines. The merger between United Airlines and continental took place on October 1st, 2010. Due to the merger, United Continental Holdings is the largest airline in the world. The combined entity operates approximately 5,800 flights a day to more than 375 U.S. domestic and international destinations.The company's hub and spoke system allows it to transport passengers between a large number of destinations with substantially more frequent service than if each route were served directly.

JetBlue Airways (JBLU): JetBlue Airways is the 8th largest airline in the U.S. by revenue passenger miles. JetBlue differentiates itself from other airline travel companies with its low fares, made possible by low distribution and operating costs - largely due to the fact that it has the youngest fleet in all domestic airlines. JetBlue Airways specializes in cheap point-to-point flights with high levels of customer service to over 50 destinations in around 20 states, Puerto Rico, Mexico, and the Carribean.[10]

Southwest Airlines Company (LUV): Southwest Airlines is the largest domestic carrier by total passengers, carrying over 100 million passengers. Southwest thrives on maintaining low operating expenses, primarily through its extensive fuel hedging. Because of its low costs, Southwest was able to remain profitable for 37 consecutive years, a feat unmatched in commercial aviation history.[11]

US Airways Group (LCC) US Airways is a major domestic air carrier approximately operates 3,800 flights to 230 destinations across the U.S., Canada, the Caribbean, Latin America and Europe. The company’s finances suffered considerably due to reduced air travel following September 11th, forcing the airline to declare bankruptcy in 2002. However, unlike other carriers that improved and emerged stronger following Chapter 11 protection, US Airways never fully recovered. The combination of high fuel costs and tough labor negotiations forced the company into a merger with America West in 2005. While the US Airways name was maintained for brand purposes, the merger actually left America West executives and stockholders with more control over the new company.[12]

References

  1. Marketwatch: DAL bankruptcy
  2. Reuters
  3. Wikipedia: Largest Passenger Airlines
  4. AJC.com: Delta Fleet
  5. 5.0 5.1 Wikinvest SEC Files: DAL 2010 10-K, Item 8, Selected Financial Data
  6. MarketWatch: Airline Stocks Hammered by Latest Economic Data, 08-19-2010
  7. Southwest.com
  8. Wikinvest Stock Summary: AirTran
  9. Wikinvest Stock Summary: AMR
  10. Wikinvest Stock Summary: JBLU
  11. Wikinvest Stock Summary: LUV
  12. Wikinvest Stock Summary: LCC
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